Reforms that will see the tax office provide information to credit reporting agencies could impinge on privacy and signal a harder line towards small business, critics have warned.

The Turnbull government's proposed Transparency of Taxation Debts laws will initially apply to businesses with Australian Business Numbers and tax debts of more than $10,000 that are at least 90 days overdue. In those circumstances the Australian Tax Office will be able to notify credit rating agencies of the debts.

The ATO has been consulting with stakeholders and insists proper safeguards are in place to protect taxpayers but several submissions to an inquiry on the proposed laws have expressed concerns.Inspector-General of Taxation Ali Noroozi said his office, which assesses complaints about the ATO, would now have to "provide independent assurance and safeguard with respect to the administration of the measures".

Mr Noroozi recommended the proposed laws require the ATO to inform affected taxpayers that they can lodge a complaint with his office. He said that since his 2015 Debt Collection review, his office had continued to receive complaints concerning difficulties in negotiating payment arrangements with the ATO. The bill provides an exemption for taxpayers from having their tax debt information being disclosed if they effectively engage with the Commissioner to manage their tax debt.But Mr Noroozi said taxpayers may consider that they are "effectively engaging" by means such as requesting a payment deferral, providing a security towards a debt or seeking release from the debt due to serious financial hardship."Accordingly, the definition of effective engagement in the [proposed laws] should be expanded,” he said.

Self Employed Australia's Ken Phillips said his members opposed the bill and he called for the proposed laws to be withdrawn."The Bill is not promoting a transparency issue,” he said. "Rather, it is a grab for additional powers by the ATO for use against small business people.”Mr Phillips said the ATO already had "draconian powers"."If Parliament were to give the ATO additional power to report small business people’s alleged tax debts to credit rating agencies, it would further extend the ATO’s ability to bully, harass and destroy small business people.”

The Institute of Public Accountants’ Tony Greco was worried that there was a risk the ATO could delay notifying agencies when tax debts are removed.The proposed laws state that a credit reporting agency must remove the tax debt information within two business days of receiving the ATO instruction that a debt has been paid, but left it up to the ATO to ensure credit agencies are doing the right thing.He said it should be a legal requirement for credit agencies to have up to date information. To do otherwise would "jeopardise the ability of a business to seek further finance".

An ATO spokeswoman said taxpayer safeguards were already available.The measure was designed to "support more informed decision-making in the business community by making unpaid tax debts visible", she said, and "reduce unfair advantage obtained by businesses that do not pay their tax on time, and encourage businesses to engage with us to manage their tax debts".Feedback on the consultation paper closed on February 9. The government will now have to consider the feedback.

If you're having difficulties with an outstanding tax debt, call our office to see what measures you can take to get the debt under control.